Global Economy

Lord Harrison Excerpts

Thursday 11th August 2011 Lords Chamber

[Baroness Kramer]

My Lords, these dark glasses are not for glamour but to prevent me sharing an eye infection. I very much agree with the Minister that the Government, and individuals, have no choice but to deleverage. Many of our large companies are not anxious at this time to invest or borrow significantly because they are doubtful about both the domestic and international economy. Surely, however, one sector has significant capacity to absorb new investment in the form of equity and debt: that of the micro-businesses and very small businesses, because they have been in large part neglected by our banking sector and our financial institutions for years. Would the Minister be willing to look at a programme that specifically targets those kinds of businesses which, culturally, our current institutions usually fail to serve, perhaps building off some of the schemes which are being looked at now to revitalise the high streets which were so badly damaged earlier this week?

[Lord Harrison]

My Lords, I am sorry that the Minister has had to break off his holiday reading of your Lordships’ European Union Select Committee’s Sovereign Credit Ratings report. I hope that he will return and study it when he is next on the beach, and reflect on some of the words from the noble Lord, Lord Oakeshott. These institutions exist but a healthier degree of scepticism might inform the City and, indeed, elsewhere to ensure that they are taken for what they are—an educated guess as to the future debt of sovereign nations.

Secondly, would the Minister consult his colleague on the business section about the regional growth fund, which I raised some months ago? I discovered and reported to your Lordships that it was unsuccessful at the moment, especially because of the £1 million bar required for small businesses to make application to that fund. My third point relates to the points made by the noble Baroness, Lady O’Cathain, in the European Sub-Committee B’s report on the single, internal market. Why do we not put greater effort into ensuring that the market comes to fruition, which would surely benefit UK companies perhaps more than any others within the 27 countries of the European Union?

[The Archbishop of York]

My Lords, I listened intently to the Minister but I did not hear in that Statement what the Government intend to do about inflation. The noble Baroness, Lady Thatcher, believed when she was in the other place that inflation was a danger to savings, to investment and to growth. Inflation is rising; what are the Government going to do to cure that particular problem and difficulty? Secondly, debt in the United Kingdom is not just government debt. The greatest difficulty we have is personal debt. When austerity measures are there to cure the national debt, is it ever wise to then encourage the ordinary person to go out and spend? How can that be right? They, too, ought to have austerity measures for themselves.

Finally, I have listened intently and what I constantly hear is that our difficulty is—and it comes again and again—the mess that we inherited from the last Government. Is that right? They certainly left a big debt, but it certainly was not just that. What about the role of the banks? They got us into a mess, and I never hear it said that the mess was caused not just by the last Government but by our financial institutions that left us in debt. Is it not time to put the blame not only on one foot but on both feet?

--- Later in debate ---

[Lord Sassoon]

If the noble Lord will be a little patient, I will get back to Europe in a moment.

It was nice to have confirmation from the noble Lord, Lord Radice, that we are all on the same side when it comes to wanting to strengthen the eurozone, even if he questions the motives of some of us in wanting to do so. It really is very important that this happens, and we should give it all our support.

On the other European matters raised by the noble Lord, Lord Pearson of Rannoch, his main questions were around the cost of this country’s contribution to Europe. He makes that contribution £25 million a day. I cannot calculate things that quickly, but the fundamental difference between that £25 million a day and the £120 million a day of debt interest that I referred to earlier is that the £25-million-a-day contribution to Europe buys us value for money. Of course we believe that Europe needs to get its budget in hand, that there needs to be much greater fiscal discipline in Brussels and that the proposals for a great expansion of the European budget are unacceptable. Nevertheless, we have to bring ourselves back to the main point that this country gets considerable value from its membership of the European Union, and that that is fundamental to making sure that we have good strong markets for our exports. Yes, there is a burden of regulation from Brussels, and we must make sure that Brussels starts to apply the disciplines that we are applying in this country before it brings forward yet more regulation.

A number of questions were asked by my noble friends Lady Kramer and Lord Cotter and the noble Lord, Lord Harrison, about access to various domestic and European funds. All I say as a general point is that I hear very loudly what is being said. The Government’s objective is to make sure that in direct lending by the banks and in other finance—the most reverend Primate reminded us that the banks are far from blameless in the situation that we are in, and my noble friend Lord Oakeshott and other noble Lords reminded us of the importance of the banks—there is a whole range of financing channels. We have the critical Merlin agreement and European funds such as the regional growth fund—

[Lord Harrison]

Would the noble Lord be kind enough to write to me on the regional growth fund and update the House on what has happened to it with regard to helping small businesses?

[Lord Sassoon]

I will take away the noble Lord’s question. Forgive me, but I cannot now remember when we are committed to making regular updates, and it may be that we should wait until the next regular update. I will see whether any more can be said, but maybe we should be patient. I understand that he would like a quiet bilateral discussion, but I cannot promise him early information. The important point that he and other noble Lords make is that we have to work very hard to ensure a suitable range of channels for access to both debt and equity finance.

Incidentally, on the other point made by the noble Lord, Lord Harrison, I was taken away from some European-related reading yesterday. I had just got to the chapter in Edward Heath’s biography on the first negotiations for our European entry, so I have a few years to go before I get to the latest report from your Lordships’ committee. If I am allowed to go back on holiday, I will get there as quickly as I can.

The most reverend Primate the Archbishop of York raised another critically important point, which was about inflation. Clearly, inflation makes an enormous difference to the spending ability of individuals and has a significant effect on the costs for businesses. As we have discussed in this House on many occasions recently, it is critical that the Monetary Policy Committee continues to have free rein and is not constrained by the Government in any way in meeting its mandate. I commend to the most reverend Primate the words of the Governor of the Bank of England in his latest report, issued this week, in which he acknowledges that inflation may go over 5 per cent in the short term but says that he expects inflation to moderate in the medium term and to come down to slightly below the target that the Chancellor has set of 2 per cent. As my noble friend Lord Oakeshott will know, in the context of that discussion the governor made some interesting remarks about the possibility of quantitative easing. No doubt when the MPC’s minutes next come out we will look to see what was discussed at its last meeting, but clearly this is a live topic.

My noble friend Lord Flight gave a perceptive analysis of the markets. I do not think that he asked me a question in that, but I agree with a lot of his analysis.

The noble Lord, Lord Lea of Crondall, raised questions about the UK and Germany and made reference to BMW. All that I would ask him is why BMW has announced in recent months a further massive investment, of hundreds of millions of pounds, in its car manufacturing in this country. I suggest that that is because the best of our manufacturing is at least as good as and in some cases significantly better than the best of manufacturing in Germany, fine manufacturing economy though it is. We have in this country—Mini exemplifies this absolutely—design skills that are second to none. If the noble Lord would like to fire off at me another Written Question or three, I will be happy to try to answer better next time his points on relative added value, but I do not think that we have anything to be ashamed of—far from it—in a comparison between the best of our industry and the best of German industry.